Campbell Soup profit beats expectations

By IBT Staff Reporter On 05/23/11 AT 12:16 PM

Campbell Soup Co reported a better-than-expected quarterly profit on Monday and forecast full-year results at the high end of its range, after moving its focus from profit-sapping promotions to advertisements.

Yet the world's top soup maker saw U.S. soup sales fall for the fourth straight quarter, a sign that it may take some time for Chief Operating Officer Denise Morrison to turn around the company after she likely takes over as CEO this summer.

She definitely acknowledges that change is necessary at Campbell and she appears up to the challenge in terms of exploring opportunities that could right the ship, said Morningstar analyst Erin Lash. She also said Campbell would need to report several quarters of improved results to prove that a turnaround was sustainable.

Campbell shares were down about 6 cents at $35.18 in early New York Stock Exchange trading.

The company has endured several winters of slow soup sales, hurt by intense competition from makers of other soups and simple meals. It also saw its profit margins hurt by deep discounting -- that did not spur sales as much as hoped -- in the first half of the fiscal year.

The company has since shifted spending toward advertising, saying the move should strengthen its prices and brand equity over time.

We remain focused on our plans to stabilize and then profitably grow net sales, and we are stepping up our game across the company, COO Morrison said in a statement.

Morrison is expected to replace CEO Douglas Conant when he steps down in July. She most recently ran the North American soup, sauce and beverage unit, which includes Prego pasta sauces and V8 juice drinks in addition to Campbell's soup.

SOUP SALES WEAK

Campbell reported net income of $187 million, or 57 cents per share, in its fiscal third quarter that ended on May 1, up from $168 million, or 49 cents per share, a year earlier.

Analysts on average expected 52 cents per share, according to Thomson Reuters I/B/E/S.

In the company's baking and snacking unit, which includes Pepperidge Farm cookies and crackers, sales rose 10 percent.

Campbell said it expects full-year results to come in at the high end of its forecast, which calls for earnings per share to fall between 1 percent and 3 percent on sales ranging from down 1 percent to up 1 percent.

(This story was corrected in paragraph 2 to say U.S. soup sales fell and that Morrison will likely take over as CEO)